Books on Slovakia
% of GDP
Update No: 110 - (27/07/06)
Fico displaces Dzurinda
After an eight-year rule by a centre-right cabinet under the leadership of Mikuláš
Dzurinda, Slovaks have once again voted for change.
This time however it was not at the cost of HZDS leader, Vladimír Meciar, but
Dzurinda's SDKÚ-DS. This year's symbol of "change" is Smer-Social
Democracy led by Robert Fico, which received almost one-third of all votes cast
(almost 680,000, which is about 300,000 more than in the 2002 elections).
Slovakia as part of a negative trend
Political tensions in Central and Eastern Europe are casting a shadow over
investor confidence throughout the region that is struggling to recover from the
recent sell-off across emerging markets.
Analysts and investors have been unsettled by Ukraine's battle to forge a new
government and the Czech Republic's post- election political stalemate.
But the emergence of populist governments in Slovakia and Poland in particular
have sent shudders through the international investment community. "These
countries are used to political turmoil, but its looks pretty grim at the
moment," said Lars Christensen, senior analyst at Danske Bank.
Worries that record oil prices could trigger a rise in borrowing costs and as a
result undercut global economic growth have been partly to blame for investors'
retreat from emerging markets that has sparked turmoil on financial markets in
parts of Central and Eastern Europe.
Analysts are concerned that both politics and economics could be both moving in
the wrong direction in Slovakia with the new government led by Prime Minister
Robert Fico having severely rattled investors' confidence in the country.
Once a model of economic transformation, Slovakia's new coalition government
fronted by Fico's Social Democrats and including ultra-nationalists and the
Movement for a Democratic Slovakia led by a former authoritarian prime minister,
Vladimir Meciar, has sparked fears about the outlook for foreign investment in
At the same time, Slovakia's economy currently risks overheating with inflation
running at above 4 percent, the nation's current account ballooning out, GDP
growth surging and a drop in the flow of foreign investment which has helped to
prop up the currency, the koruna.
While Fico insists that Slovakia's investment climate will not be put at risk by
the new government, his threats made prior to the June election about rolling
back economic reforms launched in recent years have deeply unsettled investors.
The real test of the new political world taking shape among the EU newcomers is
likely to be their commitment to joining up to the euro. Analysts doubt whether
the Fico government's spending plans will allow it to meet its 2009 deadline for
signing up to the common currency.
Budapest appalled at Slota's anti-Hungarian statements
Populism has a way of unleashing ethnic tension. Gypsies and Hungarians are
at particular risk in Slovakia.
The Hungarian government is shocked by anti-Hungarian statements by Jan Slota,
leader of the Slovak National Party (SNS), now a coalition member, which he made
for the Saturday (July 22) edition of the Czech daily Lidove noviny, Hungarian
Foreign Minister Kinga Goencz said at a meeting of diplomats on July 24.
Slota said that Slovaks were oppressed by ethnic Hungarians in southern
Slovakia. The SNS is a junior partner in Fico's three-party government arising
from the June general elections.
"We were shocked by Slota's weekend interview," Goencz said, adding
that Hungary had hoped that the tone of Slota's statements would change after
his party joined the governing coalition.
Slota said he wondered why no one abroad or Slovak senior officials resented the
activities of the Hungarian Coalition Party (SMK) in Slovakia that questioned
the borders delineated after World War One, and the Benes decrees, which
sanctioned the deportation of Germans from Czechoslovakia after World War Two,
and sought the cancellation of the 1920 Trianon treaty, one of the fundaments of
Slota said that the SNS did not want to oppress anyone or to ban the use of
their mother tongue. "We are only struggling against those SMK officials
who as a minority oppress the majority nation on its sovereign territory, on the
territory of Slovakia," Slota said.
Slota said he envied Czechs for having been able to deport ethnic Germans from
the former Czechoslovakia.
There are some 500,000 ethnic Hungarians, who make up about ten percent of
Slovakia's population. They mostly inhabit southern Slovakia alongside the
border with Hungary.
"It is apparent that such statements... are not consistent with European
norms," Goencz said. "There is undoubtedly space for the Slovak
government to comment on the statements," she added. She said that if the
Slovak government does not disavow Slota's words, Hungary would officially ask
it to do so.
S&P's rating may weaken on Euro postponement
The International ratings agency Standard & Poor's warned recently that
Slovakia's rating could weaken if the new cabinet wasted resources and postponed
the introduction of the Euro, Slovak Spectator reported.
A worse rating would mean a rougher road for the future government in loan
negotiations. Robert Fico, whose Smer party won the 2006 parliamentary
elections, reiterated on June 18th his commitment to the January 2009 date of
Euro adoption set by the Mikulas Dzurinda government, but did not rule out
changes, the news daily reported. According to analysts, the Euro adoption would
be threatened if a Smer-HZDS-SNS ruling coalition were formed. A Smer-KDH-SMK
coalition could also pose a risk.
Global IT leaders carve out new markets
Spending on information technology (IT) services surged by nearly 22 per cent in
Slovakia in 2005, the marketing group IDC said recently, as economic change
continued to take hold in the new European Union member state, Deutsche
Presse-Agentur (dpa) reported.
Releasing the report in Prague, the IDC said that the growing sophistication of
the Slovakian IT industry had led to market consolidation and a drive by
international IT groups to carve out new business empires in the country.
Slovakia reported a robust 6.3 per cent economic growth rate during the first
quarter. The growing maturity of the Slovak IT market had also helped to fuel
demand for services and had resulted in a shift from support and installation to
application consulting and customisation services, the IDC said. Together the
top five vendors, which include Hewlett-Packard, IBM, Siemens Program and System
Engineering and Siemens Business Services, expanded their market share from 30
per cent of spending to nearly 35 per cent, the report said.
"These numbers reflect the increased interest of international service
vendors in the Slovak market," said Jeffrey Vavra, IDC's senior analyst for
IT Services in Central and Eastern Europe. "And with good cause," he
said. Over the last couple of years, Slovakia has exceeded expectations in terms
of economy, reform, and IT, and the IT services market is no exception.
"Manufacturing in particular is experiencing a renaissance and FDI (foreign
direct investment) should continue to fund new factories which in turn will
boost the need for IT," Vavra said.